Goodyear to Close Australian Factory by End of Year

Goodyear’s sole new tyre manufacturing facility in Australia is to close, announced Goodyear Tire & Rubber on June 25. The company states the closure of the Somerton plant in the North of Melbourne, Victoria will take place before the end of the year and is occurring as part of Goodyear’s global strategy to reduce high-cost manufacturing capacity and replace this with a more cost-effective supply of products. The elimination of Somerton’s output will reduce this high-cost capacity by approximately 3 million units per annum, with annual cost savings of around US$35 million. Up to 587 workers will be made redundant.

“This completes our commitment to reduce high-cost capacity by about 25 million units and achieve annual cost savings of more than $150 million,” said Goodyear chairman and chief executive officer Robert J. Keegan. “Going forward, our efforts will be focused on increasing production of high-value-added tyres in low-cost operations to support growth in these segments in Asia-Pacific markets, including Australia and New Zealand.”

South Pacific Tyres (SPT) is beginning talks with the affected workers and union representatives regarding the plan. “South Pacific Tyres respects the role of various unions in representing its workforce and will engage and collaborate with associates and their unions to ensure a smooth transition,” said SPT chief executive officer Judith Swales. “South Pacific tyres recognises the potential economic and social repercussions of this announcement and will work with local and state governments as appropriate to ease its effect.”

“Goodyear and South Pacific Tyres remain committed to their customers and a strong and ongoing product, retail and wholesale presence in Australia,” Swales added. “Despite the best efforts of our manufacturing workers and their improvements in the area of quality, safety and waste, the Somerton factory is still not cost competitive. While the plant has capacity to produce around 10,000 tyres per day, it is not able to produce the high-value-added tyres that foreign and domestic consumers are demanding in record numbers.”

Total restructuring and accelerated depreciation charges for this action are estimated to be approximately $125 million after tax, of which approximately $85 million is for cash charges. Goodyear anticipates recording charges of approximately $75 million after tax in the second quarter of 2008.